Newspaper article THE JOURNAL RECORD

Red Hat Shares Could Fall as Novelty Wears off, Analysts Say

Newspaper article THE JOURNAL RECORD

Red Hat Shares Could Fall as Novelty Wears off, Analysts Say

Article excerpt

DURHAM, N.C. (Bloomberg) -- Shares of Red Hat, which is betting it can popularize a free computer operating system that competes with Microsoft's Windows, could tumble in the next few months as the novelty of the first public Linux company wears off, analysts said.

Since the company first sold shares to the public on Aug. 11, its stock has more than quadrupled, giving the company a market value of $4.55 billion. Friday, shares fell 3 3/16 to 68c. Red Hat is the first company to go public that sells a commercial version of Linux, a free operating system that's used to run powerful corporate computers, or servers.

While Microsoft executives said in an internal memo late last year that Linux is a significant revenue threat to its Windows NT operating system, Red Hat is unlikely to pose a threat to the world's largest software maker, analysts say. That's because anyone can download Linux free from the Internet rather than paying Red Hat. Dozens of rivals such as Caldera Systems and TurboLinux are also muscling in on the action.

"Linux's growth and popularity does not translate into popularity for Red Hat," said Matthew Nordan, an analyst at Forrester Research, a Cambridge, Mass.-based technology research company.

Linux was the fastest-growing server system last year, when the Durham-based company had about 56 percent of commercial Linux shipments.

Those figures don't translate into a lot of revenue for Red Hat, however. The money-losing company had revenue of $10.8 million for its fiscal year ended Feb. 28.

"I think we'll probably see people stop and assess (whether) Red Hat (can) produce the revenue that's expected for a company of that size," said Dan Kusnetzky of market researcher International Data.

Red Hat declined to comment.

Even though Linux use is growing quickly, the commercial market is still fairly small, according to IDC's figures. …

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